Opinion by: Margaret Rosenfeld, chief legal officer of Everstake
The Federal Housing Finance Agency’s (FHFA) recent directive to explore how cryptocurrency might be included in single-family mortgage risk assessments is a welcome and long-overdue step.
If implemented, it could allow long-term crypto holders to use their digital assets when qualifying for a mortgage without being forced to liquidate them.
To realize its potential, the resulting proposals must reflect how crypto actually works. And that means recognizing the legitimacy of self-custodied digital assets.
Misreading the FHFA directive
Some have already misread the directive requiring crypto to be custodied on a US-regulated exchange to count. That would be a serious mistake — and contrary to the plain text of the directive.
“Digital assets… must be capable of being evidenced and stored on a US-regulated, centralized exchange subject to all applicable laws.”
The phrase “capable of being stored” is clear. The directive calls for assets to be verified and safely handled through US-regulated infrastructure, not for a ban on assets held elsewhere. Verifiability must be the standard, not a specific custody model.
The security case for self-custody
Self-custody is not a fringe activity in crypto. It is the foundation of the system’s architecture and security. Compared to centralized exchanges, well-managed self-custody can offer superior transparency, auditability and protection. Collapses of major custodians and centralized exchanges have shown how real counterparty risk can be.
Properly documented, self-custodied assets can be fully auditable, as onchain records demonstrate balance and ownership. They also offer a higher level of security, since cold storage and non-custodial wallets reduce single points of failure. In addition, self-custodied assets are verifiable, with third-party tools already available to attest to wallet holdings and transaction history.
If policymakers exclude these assets from mortgage underwriting simply because they aren’t exchange-custodied, they risk incentivizing less secure practices and penalizing users for doing crypto correctly.
A framework that supports innovation
There’s a better path. Any sound crypto mortgage framework should allow both self-custodied and custodial holdings, provided they meet standards of verifiability and liquidity. It should also apply appropriate valuation discounts (haircuts) to account for volatility.
Another key requirement is limiting crypto’s share of total reserves using a standard risk-based tiered approach.
Related: US regulator orders Fannie Mae, Freddie Mac to consider crypto for mortgage
Finally, it should mandate clear documentation of verification and pricing methods, regardless of custody type. This thinking is already applied to volatile assets like stocks, foreign currencies and even private shares. Crypto should be treated no differently.
Don’t force crypto into outdated models
This directive has the potential to modernize housing finance for a digital age. It must, however, avoid the trap of forcing crypto to mimic traditional models just to be understood.
We don’t need to flatten decentralization to fit old risk boxes. We just need smart ways to verify it. Let’s get this right, not just for crypto holders but also for the integrity of the mortgage system itself.
This is only one example of a larger challenge facing new crypto policy. From tax reporting to securities classification, too many rules are drafted assuming all users rely on centralized intermediaries. Millions of participants choose self-custody or decentralized platforms because they value transparency, autonomy, lack of traditional intermediaries and security. Others prefer regulated custodians that centralization offers.
Both models are legitimate, and any effective regulatory framework must recognize that users will continue to demand different options.
More technical education about decentralized technology is essential to bridge this gap. Policymakers and regulators need a deeper understanding of how decentralization works, why self-custody matters and what tools exist to verify ownership without relying on third parties.
Without this foundation, future directives, statements, regulations and legislation risk repeating the same mistake, which overlooks large segments of the ecosystem and fails to account for the full range of crypto industry participants.
Opinion by: Margaret Rosenfeld, chief legal officer of Everstake.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.